Assessment of Key Components in Recent Securitization Guidelines
The European Commission has published a major legislative package aimed at reviving the EU securitisation market, with proposals to simplify the regulatory environment, reduce operational costs, and lighten prudential capital requirements [1][2][3]. The reform seeks to encourage financial institutions to engage more in securitisation activities, freeing up resources for lending to households and businesses, supporting EU growth priorities like the green and digital transitions.
However, the current EU securitisation framework, established between 2017 and 2020, has faced criticism for imposing excessive regulatory burdens that have stifled market growth. A 2024 consultation gathered stakeholder input, highlighting particularly high compliance costs and complexity as deterrents [1][2].
Recently, a group of German financial stakeholders, including banks, savings banks, leasing companies, and financial associations, have expressed concerns about a key element of the reform: the new category of 'resilient' securitizations [2][3]. These groups have reservations about the regulatory treatment and criteria defining this category.
The concern is that although the intent is to distinguish more robust securitizations with tailored prudential rules, the definitions and regulatory implications could lead to unintended constraints or competitive imbalances. The precise concerns include the risk of high regulatory costs or capital requirements limiting the appeal of the 'resilient' category, potential market fragmentation if different jurisdictions or institutions interpret resilience differently, and practical challenges for leasing companies and German banks in structuring securitizations to qualify under the new rules without losing efficiency.
These concerns reflect a cautious stance towards the reforms, despite general support for reviving securitisation. The organizations argue that the 'resilient' category could discourage the issuance of simpler, vanilla securitizations, which are essential for the functioning of the market. They also suggest that the 'resilient' category could lead to a lack of transparency and comparability in the securitization market, making it harder for investors to make informed decisions.
The EU Commission's proposal for the Liquidity Coverage Ratio is also being scrutinized for its potential impact on the 'resilient' securitization category. The organizations claim that the 'resilient' category could lead to increased complexity and costs for securitization issuers, without providing clear benefits. They argue that the label 'resilient' could create an unfair distinction between securitizations, potentially leading to market fragmentation.
In conclusion, while the EU Commission is advancing proposals to revitalize the securitisation market by making the framework simpler and more growth-friendly, German financial stakeholders remain concerned that the new category of 'resilient' securitizations may not fully alleviate regulatory burdens or might introduce new complexities that could hinder market recovery [1][2][3]. The organizations are calling for a reconsideration of this category in the EU securitization reform.
- The German financial stakeholders, such as banks, savings banks, leasing companies, and financial associations, have expressed reservations about the new 'resilient' securitization category, questioning its regulatory treatment and the criteria defining it, as they fear it could lead to high regulatory costs, potential market fragmentation, and practical challenges for securitization structuring.
- The EU Commission's reform, intended to revive the secuitization market, is being scrutinized by the German financial stakeholders, who argue that the new 'resilient' securitization category might not fully alleviate regulatory burdens, might introduce new complexities, and could potentially lead to an unfair distinction between securitizations, all of which could hinder market recovery.
